All I have read in the last 24 hours is how Spanish government bond holders have been subordinated to the ESM. And this in turn is being touted as the cause for the souring sentiment yesterday, after some short lived euphoria. I must confess, the relevance of this subordination issue confuses me to no end. […]

The details are not fully transparent, but the Spanish bank bailout - which was requested and granted in the same minute over the weekend - appears to have three VERY important components. First and foremost it is a BANK bailout, not a state bailout. It is early days but maybe, just maybe, European officials have […]

It was Teddy Roosevelt that famously said, "Speak softly, and carry a big stick". Well, it appears the FOMC has no time for Teddy. Their stick is surely big, but their talk has been loud and clear. On the other hand, the ECB has taken a decidedly more Rooseveltian approach. There may have been some […]

Yesterday I mentioned that I would come back with some quick thoughts on likely Fed and ECB triggers for action in the wake of the elevated crisis situation in Europe. As always, it will be hard to pinpoint exact tipping points for a move - but I suspect that if we see a combination of […]

One of the many bright trade ideas to start the year was long spoos/short EURUSD. The idea was quite compelling in that the only thing that could truly derail a Bernanke-induced spoo rally would be big trouble across the pond - and hence big trouble for the EURO. And to be sure, the EURO did […]

The Euro monetary system is flawed. It is a system that was cobbled together for political purposes; and sadly it was set up in such a way that each member state retained significant sovereign powers - most importantly the ability to exit the system and default on debts in times of stress. There is virtually […]

I have been in Asia since Monday morning. And I have had many individual meetings and a few group lunches/dinners across Hong Kong and Beijing. While this is at least my 15th trip to Beijing since my first in 1997, it only gets more amazing each time. There are a number of words that come […]

As a follow up to my short note on Friday - "The single most important decision in the history of EMU" - I want to look at the contagion, fallout and global central bank policy responses in the event that the Greeks are shut out of Target2 and thus forced to exit EMU. But first, […]

Eurosystem claims directly on the Greek banking system are some 130b Euros (open market operation repos, LTROs and ELA lending). These claims are backed by a variety of highly suspect Greek collateral that is all held in custody at the BoG. For ELA borrowing (about 65b), the haircuts and lending standards are set by the […]

The German election results in Baden Wurttemberg, the Der Speigel turnaround, and the increasingly supportive comments from nearly every European official on a Greek exit have markets on edge. People are throwing around numbers like 500b in realized losses if (when) Greece repudiates and exits. And then the slippery slope starts for the rest of […]